NAME: Normal Costing Review Problem Yuletide Company is a manufacturing firm tha
ID: 2799671 • Letter: N
Question
NAME: Normal Costing Review Problem Yuletide Company is a manufacturing firm that uses normal costing. The company's inventory balances were as follows at the beginning and end of the calendar year 2016. Beginning Balance Direct Materials $14,000 Work in Process $27,000 Finished Goods$62,000 Ending Balance $22,000 $9,000 $77,000 The company applies overhead to jobs using a predetermined overhead rate based on machine hours. At the beginning of the year, the company estimated it would work 33,000 machine hours and incur $231,000 in overhead cost. The following information may be useful to you as you complete your tasks. A. Direct Materials purchased during 2016 cost a total of $315,000 B. The following employee costs were incurred: i. Direct Labor $377,000 I i Administrative Salaries 172,000 ii. Sales Salaries $147,000 C. Factory Utility Costs: $10,000 D. Depreciation for the year was $127,000 of which $120,000 is related to factory operations and $7,000 is related to selling and administrative activities. E. Machine Hours: Actual machine hours incurred in 2016 were 35,000 G. Ending Accounts Receivable Balance: $84, 000 H. Ending Prepaid Expenses: $25,000 I. Administrative Expense: $74,000 . Finished Goods Warehousing Expense was $38,000 L. M. Overhead: Assume that any under or over-applied overhead is closed 100% to Cost of Good Sold. Sales for year totaled $1,363,000 Factory Maintenance Costs: $122,000 Tasks for our homework: A. Prepare a Schedule of Cost of Goods Manufactured in Good Form (Remember that means a proper B. Prepare an Income Statement in Good Form as well. heading too!)Explanation / Answer
A. Statement showing cost of goods manufactured:
Direct materials:
Beginning raw materials
14,000.00
Add: Purchase of raw materials
315,000.00
Less: ending raw materials
(22,000.00)
Direct materials
307,000.00
Direct labor
377,000.00
Manufacturing overhead (note)
245,000.00
Add: Beginning work-in process inventory
27,000.00
Less: ending work-in process inventory
(9,000.00)
Cost of goods manufactured
947,000.00
Note: Computation of manufacturing overhead applied:
Predetermined rate = overhead cost / total machine hours
= 231,000 / 33,000 = $7 per machine hour.
Manufacturing overhead applies = Actual machine hours * rate per hour
= 35,000* $7 = $245,000.
B. Income statement:
Sales:
1,363,000.00
Less: Adjusted cost of goods sold (note-2)
(939,000.00)
Gross margin
424,000.00
Less: selling and administrative expenses
Administrative salaries
172,000.00
Depreciation
7,000.00
Sales salaries
147,000.00
Administrative expenses
74,000.00
Finished goods warehouse expenses
38,000.00
(438,000.00)
Net income / (loss)
(14,000.00)
Note-2: Computation of adjusted Cost of goods sold:
Beginning finished goods inventory
62,000.00
Cost of goods manufactured
947,000.00
Less: Ending finished goods inventory
(77,000.00)
Unadjusted cost of goods sold
932,000.00
Add: Under applied
Overhead under or over applied
Actual manufacturing overhead costs incurred
Factory utility
10,000.00
Factory depreciation
120,000.00
Factory maintenance
122,000.00
Manufacturing cost incurred
252,000.00
Manufacturing cost applied
245,000.00
Under applied
7,000.00
7,000.00
Adjusted cost of goods sold
939,000.00
Direct materials:
Beginning raw materials
14,000.00
Add: Purchase of raw materials
315,000.00
Less: ending raw materials
(22,000.00)
Direct materials
307,000.00
Direct labor
377,000.00
Manufacturing overhead (note)
245,000.00
Add: Beginning work-in process inventory
27,000.00
Less: ending work-in process inventory
(9,000.00)
Cost of goods manufactured
947,000.00
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